Vi share price reversal surprises brokers

PALAK SHAH Mumbai | Updated on August 06, 2021

Over 220 crore shares on NSE and over 51 crore on BSE were traded on Thursday

Thursday’s wild swings in the share price of Vodafone idea baffled many savvy traders in the stock market. After three consecutive days of sharp fall, the stock witnessed a sudden change of fortune and recouped nearly 25 percent from the low levels seen on Thursday. A government announcement that could benefit Vodafone Plc may be known to some high networth traders during the market hours, brokers told BusinessLine.

Vodafone has been the highest traded counter in the Indian equity market since news about its promoter-director Kumar Mangalam Birla’s letter to the government and his subsequent resignation came out. In just three days, Vodafone idea crashed by nearly 50 percent from its high of around ₹9 on Monday to touch a low of ₹4.5 on Thursday. However, on Thursday, before a significant development in India’s Parliament that could chiefly benefit Vodafone Plc — the largest promoter of Vodafone-Idea — the share price of the company bounced back to close at around ₹6 from the day’s low of ₹4.5.

Post the market closing on Thursday, Finance Minister Nirmala Sitharaman introduced the Taxation Laws (Amendment) Bill in Lok Sabha. Vodafone Plc has emerged as the chief beneficiary of the Bill, experts said. The Bill proposes to amend the Income-tax Act, 1961 post which no tax demand will be raised in future on the basis of retrospective amendment for any indirect transfer of Indian assets, if the transaction was undertaken before 28th May, 2012.

Tax demand

The government has had a tax demand of more than ₹11,000 crore against Vodafone Plc since 2010. Although the demand has been disputed, the matter was one of the key reasons for Vodafone Plc to exit India. But now that the issue was closer to resolution, there are talks that Vodafone Plc could infuse more cash into the beleaguered Vodafone idea and revive the company.

“Vodafone idea is not dead. It has cash flows worth more than ₹30,000 crore. A subscriber base of more than ₹30,000 crore. None of the world’s largest telecom companies have such a subscriber base anywhere except India. If a shut Jet Airways share can trade at over ₹100 and RCom shares too find buyers, then how was Vodafone idea witnessing a run on its price. The tax amendment Bill was a signal that Vodafone would survive,” said Kishor Ostwal, MD, CNI Global Research.

More than 220 crore shares on the NSE and over 51 crore shares on the BSE were traded on Thursday. Of this, 15 percent and 20 percent shares on the NSE and BSE, respectively, were marked for delivery, indicating some savvy investors took the shares home.

On Wednesday, Birla submitted his resignation from the board of Vodafone idea. He had also written to the government raising concerns of how the company was closer to shutting down.

Published on August 05, 2021

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